With the recent passage of the GENIUS Act in the U.S., stablecoins are gaining their own federal regulatory framework, which could change both cryptocurrency and traditional finance.
What Is the GENIUS Act?
The GENIUS Act, short for Guiding and Ensuring National Innovation for U.S. Stablecoins, establishes clear rules for companies that issue stablecoins. Until now, they operated in a legal gray area, and questions about whether their tokens were fully backed, as was the case with Tether, persisted. This law aims to resolve ambiguities and set minimum standards for how stablecoins are backed, who can issue them, and what oversight they are subject to.
What Changes Under the New Law?
The law introduces standards that require that any dollar-pegged coin be backed by real dollars or low-risk assets, such as short-term U.S. Treasuries. Issuers must either register with federal authorities, such as the Federal Reserve, or apply via state programs if their issuance is below $10 billion. Moreover, issuers cannot offer interest or yields just for holding the token, which separates stablecoins from riskier investment products.
Why It Matters?
Stablecoins are critical in the crypto economy, used for trading, transferring funds globally, and participating in DeFi. The GENIUS Act lays the groundwork necessary for stablecoins to be integrated into banking and fintech services. This also allows crypto firms to grow with more confidence, as regulated stablecoins may be more appealing to institutional investors.
The GENIUS Act represents a significant advancement for the entire crypto sector in the U.S. It establishes clear rules for stablecoins and creates opportunities for further development and integration of cryptocurrency technologies into the financial system.
